Facebook To Begin Trading On Nasdaq

There you have it, the sound of money. Mark Zuckerberg rang the opening bell for the NASDAQ stock exchange this morning. Facebook, his company, is going public today. The company's shares start trading under the ticker symbol FB. And we talked about one of the largest IPOs, initial public offerings, in history with NPR's Steve Henn.

OK. When we say one of the largest in history, how big is it here?

STEVE HENN, BYLINE: It's pretty enormous. You know, before trading even starts today on Facebook stock, the company's going to be valued at $104 billion. To put that in perspective, it's slightly more than what McDonald's is worth. It's more than what Amazon's worth, almost twice what Goldman Sachs is worth. And when I think about IPOs, I tend to think of them as a pie. This is a big pie. Facebook's pie is $104 billion. But today it's not the whole pie that's going to be for sale. Facebook is just selling a slice. It's selling a $18 billion slice. And that slice on Wall Street is known as the float.

For IPO to work, investors, usually big institutional investors, have to have an appetite.

INSKEEP: OK. So they have to pick up the $18 billion or so. So how eager are people to buy?

HENN: Well, they are very eager. When Facebook first filed to go public, it was expected they'd sell between five and 10 billion dollars of stock.

INSKEEP: Right.

HENN: Then May 9th, it filed papers saying they might sell up to 13 billion. Then last week, executives flew around the country talking to large investors on what's known as a road show. When they got back, they realized those investors were demanding more stock. So they did two things. They raised the price of each slice, each share of stock, to $38, and then they decided to sell more, more shares, roughly $5 billion more.

INSKEEP: Just so that I understand this - these are shares of the company being sold by the limited number of individuals who have owned it entirely up to now?

HENN: That's right. Not all of the stock is being sold by the individuals who owned it up till now. Facebook's issuing new stock.

INSKEEP: OK.

HENN: A hundred and eighty million shares of new stock, and that will raise close to $7 billion for the company, and the company gets to keep that. So they'll use it to buy new companies. But actually, most of the stock being sold today, close to 60 percent of the stock, and all of the extra shares that they added to the IPO are coming from previous investors.

Facebook's founder is selling about a billion dollars in stock. Now, he always planned to sell that much, largely to cover his tax bill. But some other early investors are selling more than they originally planned: Goldman Sachs, the venture capitalist Peter Thiel, and several other savvy venture investors have all decided just in the past week to sell off more of their stake.

So what initially looked like a fairly limited size for the IPO has grown, and it's largely people cashing out.

INSKEEP: Largely people cashing out. Now, that always raises the question, could this company really be worth what they say that it's going to be worth here?

HENN: Well, it is an expensive company to buy at this price. Facebook had about a billion dollars in profits last year. And unlike, you know, the previous IPO bubble in the tech industry, a billion dollars in profits makes it a real company. But at $100 billion valuation, it would take Facebook a long time to buy itself back. In comparison, Apple's price to earnings ratio is about 13. Facebook's is 100 to 1.

INSKEEP: Now, there you go. Wow, well just in case people are excited about this story and are wanting to buy a share of Facebook stock, or 10 shares of Facebook stock, is it possible for a little investor to get on the action here, whatever it may be worth?

HENN: Yeah. Starting today, that's going to be possible. What's unknown is what you're going to have to pay for it. So the big institutional investors that Facebook was selling its shares to last week, who got a piece of this, got the stock at $38 a share. Once Facebook is sharing selling its shares on the NASDAQ, those prices are going to float, and they could way up. They could go down.

But after the stock starts trading, many people who have shares - current employees, early investors - aren't going to be allowed to sell for months. So there's a relatively small supply. And many retail investors who might be eager to buy this are going to have to compete for, you know, that limited supply. So that's why sometimes you see stocks pop on the first day, even if they're already expensive, like this one is.